First Trust Deeds: A High-Yield Hedge Against Volatility

Post Category : Lending


Unless you’ve been living in a lean-to out on the edges of the Angeles National Forest, you’ve noticed how the price of gasoline has plummeted in recent weeks. In 2008, oil prices hit $145 a barrel and today analysts think $50-a-barrel oil isn’t out of the question.

While people agree that a lower oil price is good for the economy – it’s like giving everyone a tax break – the stock market dropped like a rock on news of lower oil prices.

Go figure.

I cite these cases to illustrate volatility in commodity and stock prices. Oil prices are down because production increased over the years when the price went up dramatically and there is a current easing in demand due to a soft world economy.

A roof over our heads

This brings me to my main point. When times get tough, people realize they don’t need that new car, or an expensive vacation, or even a new pair of sneakers immediately. They understand that there are a lot of things they may want, but don’t actually need.

Housing, however, is something that people always need. They may not need to come home to a new 52-inch flat screen TV, but they do need to come home. This is an important element that makes the residential real estate market – and I’m using that term broadly – far less volatile than almost any other market. And that in turn makes investing in property as well as in First Trust Deeds more predictable, which really translates into long-term investment safety.

For some investors, having a chunk of money in a volatile market where there’s a chance for big gains makes some sense. However, for virtually all investors having a good percentage of their portfolios in safe, high-yield vehicles is always a smart idea and that’s what you get with Evoque Lending First Trust Deeds.

California real estate supply

Fortunately, the kind of volatility we’re experiencing with the oil market is virtually unheard of in real estate. You see, while OPEC, on a whim, can cut or increase the supply of oil, they just aren’t making any more California real estate. Further, to protect our investors against even the historic marginal volatility we can see in Los Angeles, Orange County and San Francisco real estate, we build 35 percent protective equity into our First Trust Deeds.

(By the way, I don’t think I’m going out on a limb saying that I bet there are some speculators in the oil commodity market today who wish they had a 35 percent margin built into their investments.)

The other element that determines investor comfort with a First Trust Deed is the ability of the borrower to make payments. We’ve been in this business for more than 15 years at Evoque Lending and have become experts in vetting borrowers. We know how to sift the wheat from the chaff and that’s another reason we enjoy long-term relationships with our investors.

Attractive returns

Of course the “bottom line” is critically important and right now our investors are enjoying double-digit returns on their money. They can sit back and watch the prices of other investments be tossed around like corks in the ocean knowing that each month, like clockwork, they will receive a check.

How can your portfolio benefit from this kind of safety and ROI? If you would like to take the discussion to the next level, give me a call or send me an email. We would be privileged to have the opportunity to work with you.